The article is written by Stuti Jain, from Vivekananda institute of professional studies pursuing B.B.A.LLB(Hons) Course. This article explains about the Standard Essential Patents and its connection to the Confidentiality Clubs.

Introduction 

Patents are a type of protection that the owner has, to control the making, selling of the invention that is created by him. Patents are a type of non-tangible asset, which can help the inventor to reach skies. The essence behind the patents is its secrecy. Had people known the secret behind a particular invention, the hard work, the mind that the original inventor has __ to produce the device would all go in vain?

The devices that we use, need to interconnect amongst themselves. Like your mobile phones need interconnection with various types of Televisions, Car, with Wifi etc. These are not possible if your phone does not comply with a standard that is established for such connection. Such a standardized connection is what is patented, and has to be made available to the manufacturer of the phone if he wants his phone to avail the facility of such connection. This is the basis of the standard essential patents. Meaning of Confidentiality clubs and SEP.

Generally, the cases that are tried in the court are done in the presence of a lot of people, be it advocates of other cases or interns. The documents related to the cases are also viewed by the number of people for administrative purposes. However, in a situation where the case in question is related to highly confidential information, say Trade secret or a highly advanced patented technology, it is not advisable to conduct the trial where the access to the information is given to people who aren’t actually related to it. Hence, in certain cases, in order to conceal the trade secrets or other patented technology from the competitors, the courts allow the formation of the “Confidentiality clubs”. The main purpose of these clubs is to ensure that the information in the documents is only circulated among the people in the confidentiality club and not the other people. This is a recent phenomenon in India and has been applied only in some of the Indian Cases. The members of the confidentiality club couldn’t share the information that they get to know about. These clubs usually consist of external counsel, technical experts and representatives of the parties. Also, these proceedings of such cases are done in the cameras, whose access is only given to the members of the Confidentiality clubs. 

External Eyes only clubs (EEO clubs)These are a type of Confidentiality clubs wherein the representatives of the parties aren’t given access to the trails. Usually, the party whose patent is in question(Disclosing side) requests the courts to EEO clubs, so that their ideas or techniques are not leaked to the opposite party. On the other hand, the receiving side argues against this EEO, since it could forbid them from accessing the whole information for the trials. 

Standard Essential Patents

Have you ever wondered, as to how we can use the charger of different android chargers for different phones as well? For Example, I can use the charger of Supposedly, Vivo phones in Samsung phones, or OPPO phones. Or say, I can even use these chargers even when I go abroad. The logic behind the resemblance of the products is the “Standards” which are set by the Standard Setting Organisations(SSOs), which has to be complied to by any entity that produces the device for which such standards are laid. The owners of such standards are said to have “patent” of such a device.

If a manufacturer/ investor has to produce such a device, they have to procure the licence of such device from the patent owner and comply with the standard of such a device. The standards could be for anything related to the device, It could be related to how the device has to be tested, or output characteristics, outcomes that are expected out of that product, product geometry etc. Another example is the DVD’s that we use. It has specific standards of the size, the laser beam length etc which need to be complied to if I manufacture DVDs, after obtaining the Standard essential patents from the “patent holder”. In cases of the dispute between the licensee and the patent holder, the key area which the courts consider is whether the terms of the licences are Fair, Reasonable and Non- Discriminatory (FRAND). 

Nexus between confidentiality clubs and SEP

The patent owners, usually are the ones who have a more dominant position over the licensee as they have the rights to give these licences at an unreasonably high price or at unfair terms. Also, the licensees here are at a great disadvantage, as they cannot even refuse to obtain such licences, otherwise, they won’t be able to produce such a device. 

Hence, when the dispute arises between the two parties(Patent holder and licensee) on the terms of the licence, as mentioned above, courts see whether the terms were FRAND. For such litigation, the Confidentiality clubs come into the picture. These SEPs are the ones which need to be highly confidential and couldn’t be exposed to a lot of people. The essence of licencing these SEPs is its secrecy. 

In order to conduct a fair trial, It is important that the whole situation/ terms have to be deduced to the court of law. This is why the access to these documents and other agreements are only made available to the members of the “confidentiality clubs”. The proceeding is done in front of the cameras. 

Laws regarding the confidentiality clubs 

Section 103(3), Patent Act, 1970 – The section per se doesn’t mention the name “confidentiality club” however, it does recognize the need to keep the evidence, trial, inventions of patents only limited to advocates of other parties or to an independent expert mutually agreed upon.

Delhi High Court (Original Side) Rules, 2018 – These rules which were released by the High Court, dated 16.10.2018 clearly mentions the meaning and other protocols regarding the confidentiality clubs. Rule 17, Chapter VII mentions the power of the courts to set the clubs. Further annexure F, defines the protocols for establishing the procedure and protocols of these clubs. 

Case Laws

Transformative Learning Solutions Pvt. Ltd. & Ors. v. Pawajot Kaur Baweja & Ors

In this case, the plaintiff filed suit against the defendants for injunctions and to keep the trade secrets of the plaintiff’s company intact. The defendants were the employee of the plaintiff, who formed a separate company in the name of another defendant. In this particular case, the plaintiff requested the courts to form the Confidentiality clubs, so that the defendants are not made privy to further information and secrets of the plaintiff’s company, especially the customer’s list. The court was of the view that according to the law, in certain cases the defendants are not allowed to be the part of the confidentiality clubs, because the final decisions and the analysis have to be done by the exports per se. However, in the present case the plaintiff’s plea, that they wish to exclude defendants from the clubs since they don’t want to share the customer’s list is not an apt reason. The court said that a customer’s list is not something that a company has copyright to, hence could be shared with the defendant, who is ordered strictly not to reveal it.

However, the plaintiff’s plea was disposed of, since they were not willing to share the list and agreed to face the repercussions for the same. The court in the case mentioned that not including the defendants into the litigation deprives them the basic right to be heard and defended, and inclusion and exclusion of the defendant or their representative is the court’s decision and differs from case to case. 

TQ Delta LLC v. Zyxel Communications UK Limited & Anr

Even in this case, the judge denied the use of the “external eyes only “ and allowed the plea of the defendants to be a part of the confidentiality clubs. However, the plaintiffs, in this case, in this case, we’re given the right to exclude certain documents to the external eyes only. 

Genentech Inc. and Ors. v. Drugs Controller General of India and Ors. 

In this case, the applicant pleaded for the use of a confidentiality club for the matter that relates to the “main clinical and preclinical tests of its biosimilar drug to Trastuzumab”. The plaintiff when asked to provide an independent expert, provided its in-house representative, who would be a member of the club. The applicant’s attorney argued that since the plaintiff’s expert was his internal expert, would itself defeat the purpose of these clubs. However, the court was of the view that the need for an ‘external expert’ was not mandatory in such cases, and thereby allowed the plaintiff’s in-house expert. According to me, this order had itself defeated the purpose of the clubs since the internal expert has the chances to act biased in favour of the plaintiff. 

The issue regarding the Confidentiality club and SEP

In the above concept of confidentiality clubs, we have a clash between the 2 very important fundamental rights that our constitution guarantees us, that is “Right to be heard or Right to defend” and secondly, the “Right to privacy”.

The exclusion of the defendants in these EEO clubs is a grave injustice that could be caused by them. The attorneys are given the right to decide on the behalf of their client, even without having their consent. The very basic right of these defendants is taken away by this phenomenon. There is no doubt that the advocate would take the best decision for their client, however, the clients should be given to accept or reject the orders. In most of the case of SEP and confidentiality clubs, the dispute is regarding the rates of the licence. If due to the formation of these confidentiality clubs, the licensee/ defendants are bound by these rates that are fixed by their advocates for the time being. Moreover, the patent owners/ plaintiffs are generally the people with the deep pockets and hence have the ability to lure the proceedings. The truth of the proceeding can only be established through cross-questioning and evidence by the defendants. Generally, in the cases of SEP, the plaintiff/ the patent holder don’t have much to lose. If one defendant/ the licensee disagrees with their terms, they have several other brands to bid for them, since the patents are limited and brands are numerous to manufacture for them. 

To know more about Patents please visit: 

Conclusion 

In short, The use of these confidentiality clubs for the SEP disputes is in some ways really necessary if the patent holder wants to guard his secrecy. However, the licensee being on a submissive side of the contract of the licences, have to be given a fair chance of being heard, and expelling the licensee out of the proceedings, is a matter of grave injustice that could be done to him. 

The confidentiality clubs and the SEP could even put a burden on the end consumers. Since, the licensees are the ones who manufacture the device or technology for the use of the end consumers, after purchasing the license from the patent holder. In case of these confidentiality clubs, these licensees would include the additional cost of undesirable royalties on to the consumers, to marginalise their profits. It’s not a matter of commercial dispute, rather a matter of public interest. Even the other licensees who might be the prey of unreasonable terms of the licenses, be made aware of the reasons as to why a particular licensee has raised his voice. The patent holder, yes would be able to protect their innovation, but at the cost that the end consumers have to pay. 

References

• For knowing the deep insights over this topic, please refer: https://blog.ipleaders.in/overview-standard-essential-patent/ 
• https://kidonip.com/wp-content/uploads/2017/07/Cohen_Paper.pdf
• https://www.concurrences.com/en/glossary/standard-essential-patent-sep
• https://spicyip.com/2020/05/confidentiality-clubs-why-parties-presence-is-imperative-in-indian-sep-case-proceedings.html#:~:text=Confidentiality%20Clubs%20(‘Clubs’),(‘SEP’)%20suits.&text=They%20generally%20exclude%20parties%20to,Rules%2C%202018%20as%20notified%20here.https://spicyip.com/2020/05/confidentiality-clubs-why-parties-presence-is-imperative-in-indian-sep-case-proceedings.html#:~:text=Confidentiality%20Clubs%20(‘Clubs’),namely%2C%20advocates%20and%20external%20experts.